Botched Fundraiser Was a $33 Million Money Pit
DALLAS (CN) - Oklahoma State University cannot get a refund on $33 million in insurance premiums paid under a botched fundraising campaign for its athletics programs, a federal judge ruled.
Launched in 2007, the Gift of a Lifetime program involved several of the school's top boosters between the ages of 65 and 85 who let the athletics department take out $10 million life insurance policies on them, naming itself as the beneficiary.
Lincoln National Life Insurance Co. filed suit against Cowboy Athletics Inc., a foundation operated by the school's athletic department, and alumnus T. Boone Pickens, an oil and gas tycoon who has donated more than $400 million to his alma mater and vocally supported the unusual fundraising program.
The school projected revenues of up to $350 million, citing "actuarial analysis including mortality rates and illustrations provided by the brokers," court records state.
After Cowboy Athletics paid the $16 million annual premium on each covered booster for two years, and none of the boosters had died, university president Burns Hargis asked for copies of the policy in January 2009. Within 10 days of physically receiving the policies, the school tried to cancel the policies under free-look provisions in state law. It asked for a refund of premiums paid, arguing that the insurer failed to provide copies of the policies until 2009.
On Thursday, U.S. District Judge Jorge Solis issued an amended final judgment that says Lincoln National Life Insurance Co. should keep the premiums paid for the first two years of the program.
Athletic Director Mike Holder signed policy delivery receipts in 2007 that said the insurance would take effect only if the policy had been delivered and accepted, and the initial premium had been paid, according to the decision. An insured cannot deny knowledge of a policy's terms if it fails to examine and read a policy before accepting and paying premiums, Solis wrote, citing case law.
"Holder signed the policy delivery receipts acknowledging his free look right and delivery of the policies," Solis wrote. "It was Holder's own decision not to read the legal documents he signed and to not read the policies. Based on these documents, both Lincoln and Cowboy subsequently treated the issued policies as valid and they both performed under the contracts. For Cowboy to now claim breach of contract based on an alleged failure of delivery of the policies would itself be inequitable."
The amended final judgment dismissed the insurer's claims for breach of contract and tortious interference. Cowboy Athletics lost counterclaims for breach of contract, fraud, negligence, negligent misrepresentation, breach of duty of good faith, unjust enrichment and rescission claims.
Cowboy Athletics is liable for the costs litigation incurred by the insurer and third-party broker defendants.